The National – Wednesday, February 9, 2011
THE national executive council recently approved financial reforms that will make it easier for businesses and families to obtain loans, Treasurer Peter O’Neill said yesterday.
“Currently, it is far too difficult for businesses and families to get the loans they need and the government is committed to law reforms that will remove unnecessary red tape,” he said, adding that this would make the lending system fairer and simpler for both lenders and borrowers.
Banks and other lenders usually require some form of security or collateral to help reassure them that the loan would be repaid. These loans are called secured loans.
Large businesses may use their land or buildings as security for a loan but most Papua New Guinean businesses and families do not hold formal title over land or buildings and use their personal property as security for a loan.
“PNG laws that govern secured loans were adopted many decades ago and do not fit the needs of our growing economy,” O’Neill said.
“Because of these difficulties, many businesses and families are forced to borrow from loan sharks who charge unreasonable interest rates.
“That is why we must modernise our lending laws.”
New laws will lower the transaction costs for banks and lending institutions when making loans and, at the same time, this reform will make it easier for businesses and families to get access to loans at more affordable rates.
“These financial reforms demonstrate this government’s ongoing commitment to build the foundation for economic growth and prosperity.
“This initiative will help ensure that PNG businesses and entrepreneurs have equal opportunities to take advantage of the projected growth over the medium term.
“I have instructed the Treasury Department to prepare new legislation for secured loans in consultation with key government agencies and stakeholders in the banking and finance industry,” O’Neill said.
“I would also like to acknowledge the continuing assistance provided by experts from the Asian Development Bank, who will support government officers in the preparation of this important legislation.”